Overspend on the Health Budget 2018: Discussion

The purpose of this second session is to hear details of the projected overspend on the health Vote for 2018, with officials from the Department of Health and the HSE presenting to the committee. On behalf of the committee, I welcome from the Mr. Colm Desmond, assistant secretary, and Ms Fiona Prendergast, principal officer, from the finance unit of the Department of Health and Mr. Stephen Mulvany, chief financial officer and deputy director of the HSE.

I draw to the witnesses' attention the fact that by virtue of section 17(2)(l) of the Defamation Act 2009, they are protected by absolute privilege in respect of their evidence to this committee. However, if they are directed by the committee to cease giving evidence on a particular matter and they continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and they are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable. I also advise the witnesses that any opening statements they have made to the committee may be published on the committee's website after this meeting. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

I now invite Mr. Desmond to make his opening statement.

Mr. Colm Desmond

I welcome the opportunity to address the joint committee on the forecast outturn for 2018 for Vote 38 - Health. For 2018, the Government approved gross expenditure of €15.332 billion for the health services - €14.839 billion for current funding and €493 million for capital funding - representing a 4.9% increase on the original Vote allocation for 2017. The improving economy has enabled the health service to achieve much-needed budget increases in each of the past three years. We are very aware that there are areas where further improvements are required, and the Department will continue to work with the HSE to optimise service provision within the constraints of available funding. Demographic pressures, including a rise in chronic diseases and an ageing population, mean that we face challenges into the future in implementing our strategic responses to these developments while continuing to focus on effective management of resources to ensure that services are delivered in line with the national service plan and within budget. Not only has our population over the ages of 65 and 85 increased significantly, but due to the continuous improvements in health delivery more people are also living longer with more illnesses, requiring increased ongoing support from the health system.

In considering the drivers of expenditure in any given year, it is important to recognise the interdependencies that exist. For example, a policy goal seeking to improve client safety, underpinned by improved regulation, can be delivered through a range of interventions which may drive a requirement for increased staffing and new roles. Almost 1,100 designated centres in disability services need to be registered by the Health Information and Quality Authority, HIQA. In addition, 790 individuals were identified nationally in 2017 as requiring an immediate service response in terms of residential placement. Notably, death or incapacity of the main carer was the main driver, accounting for 29.5% of these requirements. In the case of drug spending, the main drivers are new high-tech drugs expenditure in areas such as cystic fibrosis, rheumatology and cancer and increased spend on drugs under the long-term illness scheme for conditions such as diabetes, cystic fibrosis and epilepsy.

It is important to note that a number of service areas are purely demand-driven, and spending can exceed the budgeted allocation, where forecast assumptions on demand levels differ from those experienced. Health is one of the few public services which has its pension costs reflected in its Vote. Changes to pension rates and the fact that pensioners are living longer have resulted in a significant increase in the share of the health Vote attributable to pensions. Similarly, the inclusion of the costs associated with the State Claims Agency has an impact on the health Vote annually. While an assessment is undertaken each year, it can be difficult to forecast. The increasing cost of settlements is determined by the court system and is a matter which does not fall not within the remit of the health sector.

The nature of the health services is such that the normal budget management levers available to other sectors, such as reduction of services, are simply not available to the HSE in some areas. The winter of 2018 was very difficult for our health services. During February, there was a 7.7% increase in attendances and a 5% increase in emergency department, ED, admissions compared to February 2017. This growth in demand is well ahead of population growth and reflects international evidence that emergency department demand is driven by more than demographic factors. This increased demand was further exacerbated in March by the impact of Storm Emma and the associated severe weather experienced across the country. Other external factors, such as the actions of the private health insurers, are also driving the need for additional funding.

Regarding the financial position and the 2018 outturn, while it is still too early to forecast accurately the year-end position, significant deficits are emerging, driven in large part by the issues referred to above. I refer, for example, to: a private patient income shortfall of around €100 million, arising from the campaign by the insurers to dissuade their policyholders from using their insurance when admitted through an ED; a higher level of State Claims Agency payouts than budgeted for, approximately €50 million; a primary care reimbursement service driven by costs and demand for drugs, especially high-tech and long-term illness, in the range of €95 million; a higher level of spend on national reform projects, in the range of €40 million; a higher level of spend on service areas, acute and social care, in the range of €220 million; and non-achievement of tranche 3 of the value improvement programme, in the range of €150 million.

The overspend in the service areas is driven by a number of factors, including the non-achievement of value improvement programme, VIP, targets, higher levels and higher complexity of demand, costs associated with meeting national standards and emergency placements beyond the level funded. Based on spending this year to date, it is clear that there will be an overrun in 2018. In that context, the announcement by the Minister for Public Expenditure and Reform, Deputy Donohoe, that he intends to allocate an additional €700 million to the health service in 2018 by way of a Supplementary Estimate is most welcome, particularly bearing in mind that it has been possible to carry this additionality into the base for 2019.

In drafting the capital plan for the period 2018 to 2022, the HSE identified a deficit in construction capital funding for 2018 of €109 million. During 2018 extensive measures to actively manage the capital budget have been applied. This has involved balancing, as much as practicable, the fulfilment of contractual commitments, delivery of projects and managing equipment and infrastructural risk issues such that capital expenditure remains within profile. Following this extensive engagement and management of issues, capital spending to September 2018 remains within profile. Nevertheless, there are limits to which such a level of funding shortfall in the year can be managed. As the end of the year approaches and following implementation of the measures I have outlined in the past 12 months, the projected year-end deficit has been managed down, with no further viable options available to meet this gap. However, the Minister for Public Expenditure and Reform has approved a further €20 million to be allocated to bridge a proportion of this gap in 2018 as part of the overall Supplementary Estimate amount.

Despite welcome increases over recent years, a financial challenge remains as we deal with a larger and older population, more acute health and social care requirements, increased demand for new and existing drugs and the rising costs of health technology. The costs of payments under the State Claims Agency are also rising, adding to the overall cost of health above the operational costs funded to meet the health demands of a growing and ageing population. The HSE is reporting significant overruns in the year to date and the Department continues to work closely with it to identify measures to reduce the projected deficit through mitigating actions, without impacting service levels. It is now anticipated that the bulk of VIP 1 savings for the year will be achieved in 2018, as well as a small amount of savings under VIP 2.

We must maintain our focus on improving the way services are organised and delivered, and on reducing costs, in order to maximise the ability of the health service to respond to growing needs. It is essential that those managing and delivering the service demonstrate good practice by delivering the best possible healthcare within the limits of resources that have been made available by Government each year.

I thank Mr. Desmond and invite Mr. Mulvany to make his opening statement.

Mr. Stephen Mulvany

I thank committee for the invitation to attend. The HSE spent €14.3 billion on the provision of health and social care services in 2017. This excludes capital spending. The 2018 budget for the provision of these services is €14.6 billion, which is €224 million, or 1.6%, above what was spent in 2017. The 2018 budget is €608 million, or 4.4%, higher than the 2017 budget. This is made up of pay rate funding for existing staffing levels at €278 million, funding support for the existing level of services, including demographics, at €134 million and funding for new developments at €195 million. To the end of August 2018 the HSE has spent €10 billion on the provision of health and social care services to service users, patients and their families. This is €485 million, or 5.1%, above the level of budget available to the end of August. Some 43%, or €206 million, of this €485 million overrun relates to unfunded cost growths in 2018 that are outside of the areas of spend which are amenable to normal management control efforts or relate to exceptional costs such as those associated with Storm Emma. This includes the primary care reimbursement service at €50 million, the State Claims Agency at €32 million, local demand led schemes and overseas treatment at €24 million, pensions at €9 million, acute hospital income issues related to the actions of insurers at €63 million and exceptional items, including Storm Emma, at €28 million. Some 37%, or €180 million, of this €485 million overrun relates to a shortfall in the target savings necessary to offset the unfunded costs of services that were running throughout 2017. Despite this, €37 million of savings under the value improvement programme are being reported by our community healthcare organisations and hospital groups at the end of August. This figure is indicated to be approximately €60 million in savings by year end. In addition to this, there are significant centrally generated drugs and medicine related savings being delivered by the primary care reimbursement service, for example, €27 million on a clinical protocol driven access initiative and in acute hospitals €12 million on the framework agreement with suppliers.

Finally, 20% or €99 million of this €485 million overrun relates to other unfunded cost growths in 2018 within our operational service areas. The provision of disability services to services users with intellectual and physical and sensory disabilities accounts for €29 million of this residual €99 million - emergency residential places at €19 million, costs associated with HIQA registration of residential services at €7 million and home support at €3 million. Behind these numbers there are many individual stories of service users with intellectual disabilities requiring residential care on a crisis basis due to a breakdown in their family caring arrangements. On a positive note, very substantial progress has been made in achieving HIQA registration of residential centres. The provision of services to older persons accounts for €22 million of this residual €99 million overrun, that is, home support at €5 million, transitional care beds at €2 million and public residential units at €15 million. Ireland's population aged 85 years and older is growing at approximately 4.3% per annum, which is significantly above than the EU average. The provision of acute hospital services accounts for €50 million of the residual €99 million with this being partly attributable to additional activity levels and the growing complexity and cost of care as the age of the average patient increases. In addition, bed occupancy levels in our acute hospitals, at 94%, are the second highest in the OECD and are well above the OECD average of 77%. Levels consistently above 85% are indicative of a system operating under considerable stress, with knock-on implications for efficiency, quality and cost.

Based on the data to the end of August, it is clear that the full year cost of providing essential health and social care services in 2018 will significantly exceed the available funding. In that context, the HSE very much welcomes the announcement by the Minister for Public Expenditure and Reform that he intends to allocate an additional €700 million to the health service in 2018, by way of a Supplementary Estimate. It is particularly welcome that it has been indicated that this additional allocation will remain in the base funding of the health service going into 2019. It is understood that €625 million of this €700 million will be allocated to the HSE to offset overruns in operating costs, with €20 million being allocated to support ongoing HSE capital investment.

HSE national directors and their teams, as part of the ongoing performance management process, have been working throughout the year reviewing current costs with a view to reducing the level of overrun and this will continue and be intensified to year end where this is practical. This is necessary to minimise the amount of any residual 2018 overrun.

That concludes my opening statement.

I thank Mr. Mulvany. We will now take contributions from the members. I call Deputy Donnelly.

I thank our guests for both their time and their statements. Obviously, the overrun this year, at €700 million, is huge. We will see what it reaches by the end of the year. Not only is it a vast amount of money that we must vote through this year, it also has serious implications for next year and the following years. The budget documentation has provisioned €625 million for all future years based on this year's overrun. The health budget is going to increase by nearly €1.7 billion. Over €600 million of that will be for the overrun, and there are demographics and pay agreements. When one strips it all out there is not enough left to get serious about Sláintecare and the modernisation and scaling up of the system. The overrun does not just affect the Exchequer this year but the €625 million that must be allocated to cover the overrun essentially means Sláintecare is not happening next year. Sláintecare requires approximately €1 billion per year, although one could probably pare it down a little. The implications of these overruns are enormous.

There have been overruns for a long time. However, between 2008 and 2011, they were between €70 million and €200 million, which is still significant, but then they jumped to over €300 million.

By 2014, they were at €500 million, then €600 million, €660 million and now €700 million this year. While, obviously, there may be overruns in the health sector for unforeseen events, there has been a massive leap. We are tipping along at a figure of €700 million a year and have been for the past few years, with 2017 being an outlier. What has gone on in the past few years that is different from happened in previous years? We were looking at much more modest overruns, whereas now they are enormous. Notwithstanding the fact that there are always crises and storms in the health sector, with expenditure on drugs that was unanticipated and inevitably a certain amount of unanticipated activity, why are the overruns now approximately three times what than they were a decade ago? What is going on?

Mr. Colm Desmond

In recent years he health sector has benefited from Supplementary Estimates which can vary, depending on requirements. As explained, the position on overruns is that they are mainly driven by demographics and unforeseen events which require a Supplementary Estimate. Historically, the position has varied to a fair degree and it has not necessarily been for technical reasons. In recent years, for instance, a significant additional allocation of €500 million was made in one year and it was not technically a Supplementary Estimate. The nature of the health sector is such that there is a degree of unpredictability in service requirements but also in other areas which are not service related such as those I mentioned in my opening statement.

I can also answer the questions about Sláíntecare, if the committee so wishes.

No; I wish to stay on this topic.

With the greatest of respect, that is not a reasonable answer. Demographics are predictable and should never lead to overruns. We know how many people are living in the country and have quite a good idea of how many will be in it next year. Demographics are not unforeseen and are planned for in any budget. Therefore, demographic changes cannot be the issue. While there have been overruns, based on the 11 years of information we have available, the trend has been significantly upwards. There are always unanticipated events in healthcare, but there are unanticipated events in everything, including transport or in running a coffee shop. Anyone who budgets for the year, be it for a coffee shop or a €17 billion healthcare system, makes provisions. One includes discretionary amounts of money to deal with unforeseen events such as storms, flu outbreaks or whatever else. Therefore, I do not think it is reasonable to say demographic changes are the reason for an overrun as they are entirely predictable and can be budgeted for. My question is: why are the overruns twice to three times more than what they used to be in the past four years? The wheels are coming off. Something is going more wrong than usual and my question is what is it? What has happened in the past four or five years that is different and leading to the multiples in the scale of the overruns?

Mr. Stephen Mulvany

One needs to look at the specifics for each year and what happened in it. We have set out where the deficits have occurred in the year to date and people can form a judgment on which of them was anticipated. In looking at the performance at the end of last year, if one adds the Supplementary Estimate at the time for €208 million and the residual deficit with which we were left of €166 million, one ends up with a €374 million problem. It is a larger deficit than in other years such as when the health service broke even, but one must bear the components in mind. About which parts of that €374 million could one realistically say it was a performance issue or potentially a performance issue? There was a central Government decision to make a pay award on 1 October 2017, but the Government decided to bring it forward to 1 April. The first part of the Supplementary Estimate was a €75 million increase in the allocation to allow for this. Is that a performance issue? No; it was simply a decision made by the Government, which was entirely appropriate.

The cost in respect of the State Claims Agency is €50 million. It is a difficult area in which to predict expenditure. It is difficult to come up with the actual figure between actuarial and run-rate estimates. The key point from a performance management perspective, as people in this room know, is that the State Claims Agency is not the HSE's lawyer but its insurer. It has its own statutory powers. While the money we pay to the agency is in respect of HSE-related claims, it is in respect of claims made a number of years ago. Is the figure of €50 million related to a performance management issue in the health service? I think that is the root of the question, to which the answer is no.

In 2017 the Government decided to make an access-winter investment plan, following the national service plan. That is not unusual. It accounted for €35 million of the overall Supplementary Estimate and the residual deficit.

People can form a judgment on the next big item. In 2017, €121 million of the overall €374 million is the impact on the income of acute hospitals. It includes bad debts as a result of what we refer to as the actions of private insurers. Leaving aside the question as to whether what they are doing is appropriate, the reality is they are doing it. Despite the fact that hospitals have improved their income processes, there is an element with which they cannot deal. The sum of €121 million is in the performance management space because we must manage income and seek to management the budget we have rather than the one we would like to have, but we are satisfied that the sum of €121 million does not broadly constitute a performance management issue for hospital groups.

I apologise for interrupting. I know that Mr. Mulvany is trying to answer the question in detail and not trying to avoid it, but I am asking a higher level question. He has taken one year which is perfectly reasonable and itemising the spend in it. My question concerns the fact that up to 2013, for example, the overruns were in the region of €100 million to €200 million, but from 2014 they jumped consistently to €600 to €700 million every year. Something has changed. The issues Mr. Mulvany has described are fine, but there issues in any one year. Obviously, healthcare is complex, with a big budget, while unforeseen events happen. Governments make decisions to do things in particular years. However, something has changed, if we look at profiles in which there are overruns of €100 to €200 million which suddenly jump to and remain at more than €600 million and are now €700 million. I am not asking for specific details in any one year. Why have the overruns more or less tripled since 2014 and remained at that level? It says to me something has changed within the HSE, among the population, in the Department or the Government. I do not know, but something has changed. Will Mr. Mulvany help us to understand what has changed and why there has been this massive sustained increase in the overruns?

Mr. Stephen Mulvany

I am not trying to avoid the general nature of the question, but if I look at the figures I have for the four-year period from 2008 to 2011, there is a total for Supplementary Estimates of €1.4 billion, or approximately €300 million a year on average, although there are many complexities in the figures. In 2012 the figure was €360 million, while in 2014, it was €219 million. It went to €680 million and €649 million in the following two years, 2014 and 2015, when we were coming out of the recession. One would have to have a more detailed discussion on what happened in that regard. In 2016, an interesting year, the HSE received an extra €500 million. It received it on 5 July, but the money began to be spoken about by the end of April. It was not a Supplementary Estimate. One could argue that that is a technical point.

Yes, it is. A budget was agreed to and voted through by the Dáil to deliver a service plan, to which an additional €500 million was added.

Mr. Stephen Mulvany

One would have to look at each individual year to see what the specific issues were. The health service deficit involves a combination of the level of demand, the capacity of the health service to manage the budget it is given, whether it does it well and whether it was the right budget in the first place. It is in those three spaces.

I do not have a specific answer as to why it has been different in the past three or four years. I do have specific answers as to what happened in each of those years.

I appreciate that and know that Mr. Mulvany can detail all of the information. If he was running a coffee shop, a hospital, a health care system or anything else for which he had a budget, saw that he was spending over a certain amount a year and that it had jumped by a factor of two or three and stayed at that level, he would know that something had happened. Anyone in Ireland who is running a business, a nursing home or a charity would ask himself or herslef that question. He or she would say he or she was overspending by a bit, but now we are overspending by a huge sum and it has stayed there. Something has changed and we need to understand it.

I want to go through the chronology to understand how it happened. In 2017 the Dáil voted through a health budget, on the basis of which the HSE produced a national service plan which under legislation needs to fall within the budget allocated. In fairness to the HSE, at the front of that service plan it raised serious concerns about the risk of a potential overspend and here we are with an overspend of €700 million. When the national service plan was presented to the Minister for Health with all of the associated risks flagged, did he go back to ask the HSE to revise it to one that would deal with and make provision for the risks identified? Anyone watching this debate who is running a business, a charity or a GAA team anywhere in the country knows that when someone is budgeting and dealing with a chaotic world where unforeseen things happen, as they do in the health sector and everywhere else, they make provision for this. Anyone running a hospital knows that it is necessary to make provision for a certain amount of overtime to cover emergencies and so forth. The Dáil voted through a budget of over €14 billion. The national service plan produced for the Minister mentioned serious risks about the potential for an overspend. We now have that overspend. Was the HSE instructed to go back and come up with a budget that would make appropriate provision for the risks it had foreseen?

Mr. Stephen Mulvany

I will ask Mr. Desmond to comment, but, first, while I am not trying to be difficult, unfortunately, the public health care system does not hold to the Deputy's analogy of someone running a coffee shop, a GAA club, a charity or a business. It is not as straightforward and simple as any of those things. I am not saying the Deputy's question is not valid in the sense that there are questions that need to be answered, but the analogy does not really hold. He would have to compare us with other public healthcare systems. He mentioned a specific point several times which is called out in the service plan, that we do not have, nor do we ever hold, a contingency provision. We are not in a position to do so. In the private sector a contingency provision for an organisation with a budget of €17 billion would be something in the order of 2% to 4%, which for us would be a sum in the order of between €300 and €600 million. We do not hold such a sum and the service plan calls it out every year and is approved on that basis.

Why does the HSE not hold a contingency provision?

Mr. Stephen Mulvany

There is simply not enough funding for us to do so. Were we to hold such a contingency provision, how would it work? If at the centre of the HSE we were holding a large contingency provision and that was known, it could cause all sorts of motivational and other challenges. Whether we should, the reality is that we do not and we call it out in the service plan which is approved on that basis. I would be much happier if we did have such a provision. I do not know whether there is a contingency provision held somewhere outside the health service, but we do not hold one, as is stated very clearly in the service plan.

The problem with that is we, the taxpayers, are the HSE's contingency provision. I disagree with Mr. Mulvany. I understand healthcare systems are more complicated than coffee shops, but my point is that we all know that it is good budgetary practice, no matter how simple or complex the organisation is, to predict adverse events and make provision for them accordingly. Mr. Mulvany has said the HSE knows that things are going to go wrong, that there will be extra demand but that it does not make provision accordingly. That is exactly the problem, which is why every year it goes to the Minister who has to come back to the Dáil and we have to go back to the taxpayer to say an extra €700 million is needed. If the HSE knows that provisions are required, it should make them accordingly.

Mr. Colm Desmond

The Vote for the health service is one of the biggest. There is a scale of funding available to the Government each year which it must allocate in several big priority areas. We have to live within the overall resources provided for us. That is a discipline that the Minister accepts and, as he pointed out yesterday, when the issue was raised in respect of the view of the HSE on a potential significant financial challenge, the plan service was required to be framed legally within the budget provided for the HSE and that is what it proceeded to do. There are areas which may, as I mentioned in the opening statement and to which Mr. Mulvany alluded, to some extent be unpredictable. Therefore, it is very challenging within the overall process to cater for the very substantial demands which increase year on year in the major service driven areas. I agree fully with the Deputy that it is a challenge and something which, as the Minister said yesterday, is embedded within the performance and planning process under which the HSE manages and for which it is held to account. Once the HSE had identified certain issues, the Minister pointed to the requirement under legislation for the HSE to produce the service plan that was provided for this year.

There is a section in the presentation on efficiencies, for which the estimate is €346 million. From where did that figure come? How was it calculated? How much of it has been achieved? Specifically, what components make up that figure? Did it arise from discussions with the people who presumably should deliver the efficiencies?

In budget 2019 we note that current health expenditure is met from tax receipts that are unreliable. Everybody was a little surprised and I certainly would be if I was to find that kind of money lying around. Is it prudent to fund the health service in this manner because the additional funds appeared to materialise very close to budget day? There is no suggestion they can be relied on in the future. There are references throughout the documents to increasing staff costs and pressures, but surely the officials will agree with me that if they are citing an increase in population as one of the reasons for constant overruns which are increasing, there should be a consequent increase in the number of personnel which should be easy to plan for. For example, a certain number born plus a certain number turning 85 years is equal to a certain number of staff. Can the officials give us a breakdown of the grades, groups and categories of staff that make up the increase? If they do not have the figures, perhapsthey can provide them afterwards.

Mr. Mulvany has said the HSE does not hold a contingency provision.

I am sure Mr. Desmond will say anything would be better than having no contingency at all but in terms of best practice, does he have an idea as to what kind of figure would be needed for contingency? People came to microphones and explained that the flu came as a surprise or winter came as a surprise. How much would it be prudent to have as a contingency and are there plans to have that amount in the future?

The figure for efficiencies was over-estimated. To what extent was that flagged? Has there been correspondence between the two organisations to comment on funding from volatile corporation tax receipts? Has anyone flagged that this might not be the best way to fund the health service?

Mr. Colm Desmond

The Minister for Public Expenditure and Reform makes the assessment on tax receipts and publishes his Estimate of the available fiscal space within which he frames the budget. That is not a matter on which the Department of Health and the HSE have a say. The Department of Health is, naturally, well aware of the Minister for Public Expenditure and Reform's Estimates but at the same time, the Department of Health approaches its framing of the demand each year for the heath service on the basis of needs identified. The overall allocation and the national position will guide, and will be guided by, how the Department for Health would approach the Minister for Public Expenditure and Reform.

I used the word "volatile" about tax receipts but I am not the only one who has used it. I am asking for a comment as to whether it is prudent to include once-off payments that will not be available next year. I do not think it is a prudent way to fund the health service and I ask for a comment on that. I understand how it works. I am interested in Mr. Desmond's view as to its prudence.

Mr. Colm Desmond

The Department cannot make a call regarding the overall predictability of the fiscal position which governs how all Government expenditure is decided in the budget each year. The Department can simply put forward proposals to the Minister for Public Expenditure and Reform. Those proposals are guided by an ongoing programme which is desirable of efficiencies to be achieved within the health sector. This is a desirable thing to do and will be necessary in any event and is stated as an underlying issue which will influence the delivery of the Sláintecare programme. The budget this year has set out a certain number of provisions in this regard and I think that was raised by Deputy Donnelly.

It is in that context that all Departments frame and are aware of the possibility and scope there may be but essentially, it is not the Departments' call in terms of its predictability or otherwise. The Department of Health's job is to seek to obtain as much as possible for the services that have been justified to it by the Health Service Executive, which are needed year on year, and to take account, as much as it can, of those unpredictable areas I mentioned in my opening statement. Mr. Mulvany alluded to a certain number of the areas which can arise during the year, the magnitude of which can be unforeseen.

Mr. Mulvany may wish to comment on staffing costs but the Department could revert with more detail in that matter.

Mr. Stephen Mulvany

I will have to send the Deputy something on the staffing costs. We can certainly show the movement of staff over any period, but the Deputy's general point is absolutely correct. It is possible to predict, or make estimates of the required staffing level to retain the existing level of staff and demographics. The Estimates and planning process has two large components across the public sector. The first runs up to budget day, where Departments and agencies like the HSE set out a view of what is required for the following year. The second then is budget day, which tells one what is available. The planning piece is then about how one fits the demands as best one can within what is available.

The HSE can make estimates and assumptions about what the costs will be in the following year on both sides of that process. Without looking to offer excuses, the health service is large and complex. Its system challenges are well documented and we are working on that. Progress is being made, albeit slowly because of the scale of the system. We rely on more than 2,000 organisations - 50 of them very large - to deliver the overall service. We do not ask them all to feed into the forecasting estimates process, but we do ask a number of them. Any future-focused exercise carries risk. Typically when the service plan is made, data are available for August and September, so we are looking 15 or 16 months ahead. One makes assumptions. Given the scale of our budget, every margin of error of 0.1% is about €15 million. That is a big margin.

In the context of all that, for the HSE preparing bids and service plan estimates, and obviously for those in the Department and other colleagues who review them, one is looking at a set of estimates and assumptions. In terms of calculating the value improvement programme target of €346 million in the service plan, we went through an iterative process which looked at what was the level of service it could currently provide with the available funding, what level of activity within that could be tailored to fit the funding and what level of activity was almost entirely driven by demand. The health service, as the committee knows, is complex. It is the provider of last resort, the provider of 24-7 services and the place of safety. There are a number of areas, including emergency departments in hospitals, disability, residential placements and similar areas in which a level of activity will happen even if there is not specific funding for it. Through that iterative process, we determined there was a need for savings of about €346 million. It was set out in three tranches. The first was the more immediate and urgent priority, that was about €77 million. As I said in the opening statement, we would expect to deliver about €60 million of that. We are challenged in terms of delivering much beyond that against that figure of €346 million.

I mentioned other areas of savings where money is being delivered but that is against targets that are set for them. Against that €346 million, the figure I mentioned is about what we will get.

That figure is €60 million?

Mr. Stephen Mulvany

About €60 million, so we are short.

Out of €346 million?

Mr. Stephen Mulvany

Yes.

The HSE is short? Come on. If Mr. Mulvany was in Tesco and €346 million was the bill and he said he had €60 million, they would say he is more than short.

Where did that figure come from? The HSE must have estimated that those savings could be made. It must have looked at an area where current spending could be cut. I know the health service well and I know how hard people work in it in administration, front-line services and right across the board. Somebody somewhere came up with the figure of €346 million. Was the calculation that such a saving had to be made and the HSE would then see how to do it, or was it a result of looking at the system and identifying scope for savings of €346 million? If the latter is the case, my question still stands: where did the HSE think it was going to find it? It is nearly November and there is no funded workforce plan for 2018.

Mr. Stephen Mulvany

It is a combination. I am not trying to be obtuse, but the first thing to do was to look at what level of service could be provided, what level of service had to be provided and what funding was available. That determined, in part, the requirement to identify €346 million of savings. We set out in the service plan three tranches of that. Areas were identified for the first €77 million, typically some drug savings, some agency and overtime savings and other savings of that order.

We were clear that there were other, as yet unidentified areas, which made up the second and third tranches. Those had not been identified when the service plan was done. Have we made as much progress as we would have liked on value improvement savings in 2018? No. Programmes like that take a number of years to get fully off the ground. We are short on that and we accept that. There are significant issues to be overcome in focusing on that level of savings. There were a number of unexpected draws on management focus, including the storm and an extended winter surge. These are perhaps excuses but were we overly ambitious? Maybe that is how it will be viewed but the alternative to being overly ambitious was to be unable to provide the level of service that we must provide and which was necessary. We need to be ambitious at times but we do accept that we are falling short on that figure of €346 million.

It falls far short.

Of the €346 million of proposed savings, was the first tranche €71 million?

Mr. Stephen Mulvany

It was €77 million.

They were the areas identified where savings could be made.

Mr. Stephen Mulvany

They had largely been identified by the time the service plan was completed or shortly thereafter.

The balance of the €346 million was in areas that had not yet been identified.

Mr. Stephen Mulvany

Yes and it was set out in the service plan. The figure was €120 million which was described as corporate type expenditure, whether it took place in hospitals, the community or the central corporate area. They are savings that should not impact on services. We have reviewed a figure of about €1.2 billion to look at opportunities to identify savings. In some cases, there are potential savings, some of which would take a number of years to achieve, in areas such as printing and postage and a load of corporate type overheads. In respect of the figure of €346 million, the balance was €150 million for a jointly governed programme between us and the Department of Health. It was specified as being longer term and higher level in terms of what it was seeking to do. It was not just about efficiencies, which is what the middle piece was about. It was about considering how we could reshape the system. Typically, it would take a number of years to achieve.

Therefore, the €346 million was really never achievable in 2018.

Mr. Stephen Mulvany

It was an ambitious target but necessarily so, given the constraints within which we were operating.

I am sorry to labour the point, but the figure of €346 million was identified. I fully take Mr. Mulvany's point that it is not the same as running a coffee shop, but when the HSE is asked to make savings, it surely has to be realistic. If the figure was €350 million, we might say it was someone rounding up or whatever else, but with such a specific figure, I would have expected Mr. Mulvany to be able to state the savings which had been identified. The HSE did not hit the targets set; it was miles wide, which is fine, but at least he should be able to provide some rationale for the figure. It seems €346 million was the sum the HSE thought it might hope to save. I am really at a loss to know how the figure was arrived at.

Mr. Stephen Mulvany

Perhaps I am not explaining it well. The calculation of the figure initially was based on working out the cost of the minimum services we had to provide, including services that were demand-driven such as emergency department and disability residential services. We felt that even if we were to decide we could not and would not fund them, they still would occur. When we did the arithmetic, the savings required came to €346 million. We then set out a programme. We identified the first €77 million to be save and it has largely been delivered. A sum of €60 million in savings is not inconsequential, although I know that it is a lot less than €346 million. We identified a sum of €119 million. We did not identify specific savings areas but were targeting corporate type spending, as we said. We are far behind where we would like to be in reviewing the figure of €1.2 billion. The last piece was €150 million for jointly governed initiatives to be identified more in the policy or longer term programme space between us and the Department.

Am I correct in saying that as yet there is no funded workforce plan for 2018?

Mr. Stephen Mulvany

The Department has accepted the whole-time equivalent, WTE, control limits we proposed to year end. I will have to check with my colleagues in HR as to whether it equates to a funded workforce plan. Is there a specific answer inside the workforce plan that we are trying to determine?

I want to know if there is such a plan. Perhaps it is a case of rainbows and unicorns, but I would have thought the HSE would have had a funded workforce plan for 2018 in, say, December 2017, yet we are now almost in November 2018. As I understand it, there were discussions with trade unions on a funded workforce plan. Again, I am only observing this and obviously not involved, but the discussions petered out and we still do not have such a plan.

Mr. Stephen Mulvany

The position is that on 8 April we submitted our 2018 pay and numbers strategy to the Department. In recent weeks with the Department we have agreed to an adjusted set of affordable staffing levels to year end, with one small thing to be checked. We know the levels of WTEs within which we are trying to manage a system to year end. I will talk to my colleague from HR, but from this we can extract a figure for any specific area, grade or discipline for how many we are able to put in by year end. We can probably give the Deputy the answer to her question.

Mr. Colm Desmond

On the submission in April of the draft strategy and the recent agreement of control figures, I confirm that there has been very substantial engagement between the Department and the HSE to reach the greatest understanding of the different components of the workforce. It has been an extremely significant and useful piece of work and is absolutely necessary, given that the funding of workforce planning is such a vital part of the Health Service Executive and that such a significant part of the Estimate is driven by salaries and payments. There has been extremely detailed engagement on these issues to try to assist and gain that understanding. We have recently agreed to certain control figures with the HSE.

Mr. Stephen Mulvany

We will be seeking to include the WTE levels for 2019 into this year's service plan at a high level.

Before we move to Senator Colm Burke, to clarify, the figure of €346 million was arrived at by calculating the amount of money it would take to supply services such as emergency department and disability services. The €346 million was the shortfall in the HSE's calculation of the cost of the essential services it had to provide.

Mr. Stephen Mulvany

As in any forecasting process, we were looking at funding that could come from different sources. We knew the funding that was coming from the Exchequer. We had a view of what the costs were and were trying to address the balance through savings. Would I call it a deficit? I do not know, but that is what we were trying to do. That is from where the figure started. After that, it is an issue of process, but yes, that is fundamentally how we got there.

I thank the officials for their presentation. One of the issues about which I am very concerned in the HSE is the growth in staff numbers since December 2014. My understanding is that there are now 12,000 additional people working in the HSE, of whom over 2,600 of them are working in the area of administration and management. In the past three to four years I have not seen a clear plan being set out by the HSE for where it needs to increase its workforce. Yes, we have heard about increasing the numbers of nurses and doctors, but in the area of administration generally I have not seen an overall plan. If we take it that there are an extra 12,000 people working in the HSE, the additional cost is roughly €600 million per annum, but I am open to correction on that figure. I am not clear on the stage at which there was a plan set out for the key areas in which personnel were required. It seems to have been very much hit and miss and a case of whoever shouted the loudest got additional staff. The number of staff in the area of administration and management has jumped from 15,000 to 17,600. I am concerned about the lack of planning in that regard. I have not seen any overall plan for how it is going to progress in the next few years.

When we are talking about planning, are we still only working on a one or two-year basis without having an overall objective? In the area of computerisation we have focused on employing additional staff, while we do not appear to have an overall plan, or certainly it is very vague. We are way behind other health services throughout Europe. In Denmark they worked out that their computerisation programme was saving a huge amount of money each year and they have been at it since 1996. I have not seen one coming from the HSE.

In respect of the State Claims Agency, Mr. Mulvany has said it is an additional cost. The agency is able to predict the value of cases well in advance of being settled.

As such, it should be able to flag well in advance of drafting a budget what will be paid out in the coming year. It has already made out for the next five to six years what it predicts the level of claims will be. I am a little surprised that the figure is €32 million for the agency. It is a huge figure. I imagine it has not got its figures that wrong in predicting the value of claims. As such, when the HSE corresponds with the agency before it prepares its budget, the agency is surely able to provide a good guideline for what is needed. Mr. Mulvany might clarify the issue.
I am not sure if any effort is being made by the HSE to deal with the following. There is a lack of capacity to make decisions. A huge amount of time and effort is wasted which results in the waste of a huge amount of money. I gave the recent example to the committee of 12 people within the HSE having to have a meeting in Dublin about an issue which had been raised 18 months earlier. That meeting was cancelled two days beforehand because one person had moved to a new job within the HSE and could not, therefore, attend. The meeting was cancelled which resulted in a huge loss of time in planning for it and everyone organising for it. I find that it is consistently the case in the HSE that people are not able to make decisions and that a huge amount of time is wasted. How can the organisation be made more efficient? We do not seem to have done any major work on that issue in the past few years.
Deputy Donnelly referred to the sudden increase in figures in the past few years. We are all concerned about this continuing into the future. If we are planning a 12-month budget, we should be able to plan carefully in order that there will be no overrun. We have the figures for changing demographics and the number of people with disabilities. We also have the figures for the huge numbers of elderly parents looking after people with disabilities, which will mean a huge demand on services in the next few years. Another issue I encounter a great deal is the lack of access to respite care for carers once their children with disabilities reach 18 years of age. We have known for ten years how many are in that cohort and would reach the age of 18 years, but no planning seems to have been done to make provision for them. These are issues about which I am concerned.
Mr. Mulvany referred to savings in healthcare organisations and hospital groups of €37 million under the value improvement programme. Can we have detailed figures for savings within the HSE? I have not seen a huge amount in savings. It is easy to impose savings on healthcare groups and voluntary organisations by simply setting a budget and providing it. However, I do not see the same effort being made to make savings in sections of the HSE. It is an issue about which I am concerned. There are over 2,500 organisations which rely on HSE funding. While it is very easy for the HSE to dictate and important that we get value for money from these organisations, the same set of rules does not appear to apply to internal sections of the HSE. I seek clarification in that regard.

Mr. Stephen Mulvany

I will take the Senator's questions in reverse order. On the figure of €37 million in savings, when I refer to community healthcare organisations and hospital groups, I mean the HSE. The community health care organisations are part of the statutory HSE, of which hospital groups are also part, albeit 16 involve large voluntary hospitals which are funded under section 38. The figure of €37 million is across the HSE and some of it will also be across certain voluntary organisations.

With reference to administration, planning and ICT, the HSE has set out an e-health Ireland strategy which is very clear on how to develop and invest in both clinical and non-clinical ICT, with a view to obtaining all of the returns from it, including efficiencies. That plan is in place and we are making progress with the Department's assistance in seeking to have it funded. It was announced not that long ago that there would be an EIB loan to assist in its funding. There is a long-term ICT plan. We also prepare three-year corporate plans. It is not just about relying on the annual service plan, albeit that is also in place. It is probably fair to say we do not yet have a single overarching plan for the workforce setting out specifically where we want to go with administration and management staff. That is something that needs to be closed. However, I do not accept that it is simply a matter of he who shouts the loudest. We must remember that administrative staff categories include everyone from the grade 3 personnel one meets at reception in one's clinic all the way up to people at my level and some staff we would otherwise count as technical or professional, including engineers, HR staff and accountants. It is not just all senior general managers, albeit the system, clearly, must be managed.

The argument was put to me about additional administrative staff in clinics. Every person to whom I have talked running clinics says no additional staff have been provided in the past two to three years. I have seen no evidence and no one to whom I have spoken who works on the front line has seen evidence of increased numbers of administrative staff supporting clinics.

Mr. Stephen Mulvany

We can set out, as I think we have done before, the movement in administrative and management staff numbers over time, as well as the movement at the different levels from grade 3 all the way up. I am not saying there has not been an increase at the more senior level, but if one looks at the scale of the HSE and takes the EU definition of a large enterprise as one with 500 employees, the number of very senior managers for every bundle of 500 staff members does not compare unfavourably with what one would expect to see elsewhere. Certainly, we can set out the movement at all grades in the area of administration, if that would be of help.

On the State Claims Agency, I am not for one minute suggesting it does not predict its costs. Those costs can be somewhat difficult to predict and, depending on which actuarial assumptions are used, can vary a great deal. There were periods during which there was uncertainty about some costs. The fundamental issue with the State Claims Agency which is a part of the NTMA concerns when the Government will fund the costs which arise. Will they be funded at the start of the year or through the Supplementary Estimates process? It is accepted that it is a cost which is funded by central government. In other cases the equivalent amount would not actually be included in the main operational Vote. For example, the figure for public sector pensions might not be included in the main operational Vote. In the health service they just are.

On the lack of capacity to make decisions, I do not have the details of the specific example given by the Senator, but I am not saying it did not occur. The HSE can be criticised for being overly bureaucratic, but for some people a process of engagement and seeking consensus is I hope part of how we should do change management. I cannot comment on an individual meeting which was cancelled at short notice.

It is a matter that was ongoing for 18 months. It is not unusual, given the number of times I come across something I deal with 18 months or two years and no decision is taken. It is a huge problem we run up against. One talks to someone and is told that there is a waiting period for someone up the line to make a decision. I give the example of GPs who went to the HSE with a cost savings project and who after 18 months of meetings when they got nowhere threw in the towel. It was a project which involved money savings the HSE could have made in making payments in respect of patients with haemochromatosis. GPs were offering to provide the service and had six or seven meetings with senior people in the HSE.

After 18 months no decision was made and they just threw in the towel and walked away. This was a proposal whereby the HSE could have made major savings over a period.

Mr. Stephen Mulvany

I am not trying to be argumentative but I do not know the detail of the example the Senator has given. He has now given an example and I can check it. Sometimes parties' views as to what savings can be made and how and what needs to be done to achieve those savings can differ. I am certainly happy to look into the matter because, obviously, if there are real opportunities to make savings, particularly those that actually take out cost in order that we can apply it somewhere else, we would be very anxious to be aware of them. However, it may not be as straightforward as one party saying it offered savings and the other party just not making a decision. That is not always the case when one digs into the matter. However, I am happy to have a look at the matter.

The GPs gave detailed reports time and again on how the savings could be made. They had the whole thing structured with a number of organisations and presented it to the HSE, and after 18 months there was still no decision and they walked away.

Mr. Stephen Mulvany

If the Senator has something to share in that regard, perhaps I could look into it.

Mr. Stephen Mulvany

That would be great.

Is Senator Burke happy?

Yes. It is a matter of the overall planning and the other issue I raised as to how we have had overruns in recent years. How can we guarantee we will not have the same scenario this time next year?

Mr. Colm Desmond

The Government and the Minister for Health framed the budget based on the best assessment of what is available and the way in which it can fund the services and the very many competing demands. As we said at the outset, it is a question of making a call on this within the budgetary allocation available to the Minister each year and managing that throughout the year in the manner we described while also accepting, as I pointed out at the beginning, certain unpredictable issues.

I wish to support my colleague in his comments on the State Claims Agency. Timing is everything, and one can predict matters to a degree, but the timing and the nature of the awards are challenging at times. That process is managed and is somewhat outside of our control.

Finally, I will give just a little more detail on the eHealth strategy in ICT. It is funded within the national development plan to a very substantial amount, which is a major advantage the Minister achieved in the national development plan last year. This is the firm basis for significant development in the area of eHealth.

Mr. Stephen Mulvany

The Senator raised a question about respite care and disability services. We had a budget this year of approximately €54 million, which allows us to provide a level of respite to about 6,500 people per quarter. Is there more demand than this? Absolutely. Our task is to try to provide as much of this service as possible within the resources available and to make best use of that resource for the people who need it. The number we are funding is 6,500 per quarter. In fairness, the figure of €54 million is up approximately €10 million since last year. The Minister secured a specific investment of €10 million which has been very helpful. We are not saying we could not spend more in that area, but that is the level of resource and that is what it currently provides for.

We seem to have a problem with people now reaching 18 years of age, though. Anyone who was getting respite care is continuing to get it, but anyone who has recently reached the age of 18, certainly in the South/South West hospital group area, is unable to get respite care now. This is a huge problem for parents. They are providing 24-7 care themselves. Respite care is not available to them and it is a huge challenge.

I welcome all the witnesses and thank them for coming. Unfortunately, being last, many of the questions I wanted to ask have been asked already. I will start by reiterating what my colleague, Senator Colm Burke, said about the lack of respite care, etc., for people with special needs, particularly in Cork South-West. It is a huge problem, particularly for parents who are now entering into the last part of their lives. If things could be planned together and with a guarantee that their children would be looked after when they either pass away or get too ill to mind them, it would give them great comfort. I ask the witnesses to look at this.

In Mr. Mulvany's first point, he talked about the overrun relating to unfunded cost growths. Does he have an exact cost for the cross-Border initiative? I know it is an EU incentive and, obviously, plans are up in the air now with Brexit. Even though this is a good scheme, I often wonder, if the HSE must pay anyway, is there any way around planning for this such that the money could be made available to people who are unable to travel, say, to Belfast or particularly from Cork South-West - it is a long journey to Belfast - to have their cataracts treated in the South?

Mr. Stephen Mulvany

To take the Deputy's last question first, I will provide her with some figures as to the total. That €28 million or €24 million figure concerns the variants at the end of August on the four elements of the overall cross-Border and local demand-led schemes. I can dig out the specific figure relating to the cross-Border initiative-----

Mr. Stephen Mulvany

-----and tell her what we are spending on it and what the variance is on it. It is a particular mandated scheme. While we would always prefer to be able to provide sufficient care within the country in order that people do not avail of any of these overseas treatment options, in particular the cross-Border one, which is different from some of the others, taking the money from there and using it instead in the areas more distant from the Border is probably not practical. The issue is to try to resolve as best we can what is driving people even to think about going cross-Border, which is fundamentally about providing better access to scheduled care in hospitals. I see the point the Deputy is making-----

I suppose it is also about speed.

Mr. Stephen Mulvany

Totally, and I accept the Deputy's point about respite. We would like to invest more in respite. What we must do is look at where we are investing money. Respite can stave off the need for people to go into full-time residential care. We know that the uncertainty about this, both in disabilities and other areas, may cause people to seek full-time residential care earlier, so that point is understood. The issue is whether we can put more into it, what the available level of resource is and how we make best use of what we have. Respite is seen as an essential support in disabilities, just like transitionary care and respite-----

Yes, and again, it is a huge problem in west Cork.

Mr. Stephen Mulvany

That is acknowledged.

Before I go to Deputy Durkan, I wish to ask a few questions. If the national service plan keeps missing its targets by €600 million or €700 million, is there a problem with the national service plan process? Are the predictive values of the national service plan consistently off-target? How can this be adjusted, and is the process fit for purpose?

My second question concerns health insurance, which, I think, will be estimated this year to be down €100 million. Is that €100 million from €621 million of a previous year? In Sláintecare, there is a proposal that private care be removed from public hospitals and it is outlined how the Department and the HSE would fill that gap. However, that gap is getting smaller now, by €100 million this year. Is that the case?

Finally, I think there is a €50 million increase in funding to the primary care reimbursement service, PCRS. Could the witnesses break down that €50 million into the categories it represents in respect of the PCRS?

Mr. Colm Desmond

From the Department's perspective, regarding the national service plan, certainly, it is a challenge to provide the services required each year within the overall allocation. The Department and the HSE strive to achieve what is feasible and realistic within the allocation provided by the Government.

As for the examples in the disability sector and other sectors, many challenges are continuous in terms of the ongoing upward demand in such areas - for instance, to create enough space to provide the services at community level in order that the dependency on the placements and the residential component can gradually over time be reduced while at the same time recognising that this latter area is the subject of significant regulation, as it should be, and presents its own challenges in terms of catering for people's need to have placements in residential settings. The objective is to frame the service plan in 2019 from the point of view of the most efficient use of the resources available to the health sector and to have an examination from the beginning across all these areas. Mr. Mulvany alluded to this in the context of the value improvement programme as it relates to where funding needs to be spent on an ongoing basis and the possibilities and the capacity to achieve greater efficiencies in this area. This would guide the development of the service plan. As part of that, it would be accepted in all health services that there should be an objective of achieving efficiency savings in any event.

It is certainly challenging but at the same time the legislation requires a service plan and it provides a significant over-arching framework and discipline within which the HSE presents to the Minister as required. That is the structure as it exists now along with the other objectives.

Mr. Mulvany might give some detail on health insurance. Similarly, on the primary care reimbursement service, PCRS, we may be able to provide the Chairman with some details on the composition of that figure. The matter of private health insurance is now being examined by the De Buitléir group. There are legal and other issues which come to bear on that which are also being considered by the HSE and the Department.

Mr. Stephen Mulvany

On PCRS, that figure is the variance at the end of August and is an overrun on its costs. Typically about 70% to 80% of costs in that area are the various drug-related schemes, despite the huge work and savings in the base level costs that the PCRS makes on an ongoing basis. The scheme drives value in the price of drugs and use of generics and biosimilars. We can set it out the figures across the schemes for the Chairman.

Mr. Desmond covered health insurance. At its high point, the acute hospital income from private insurance was about €630 million. That will be less for last year. We have not closed that gap and the service planning process will have to try to do so. However, to be clear, if we have a €100 million gap in that area and we close that, that represents a €100 million cost that must come from elsewhere or money that cannot be invested in something else. That gap has not been closed. That is the Sláintecare recommendation and the implications are more complex and broader than simply finding the €600 million. We will let the group examine that.

As it happens, I must go to the Chamber to ask a question on the same issue. I am somewhat concerned about some of the answers. It is bad budgeting practice to repeatedly fall short of the target on either side, unless there is some serious explanation. Take the PCRS. Drug costs can and will impact. We need a counterbalance such as a reduction in the costs through the things this committee has discussed so many times, such as the power of European Union as a procurement lever. Over the course of any year, drugs come on the market and cause problems. There will be patients for whom those drugs are suitable. A practice should be established whereby an immediate assessment is done as to how the budget will be affected, rather than waiting until the end of the year to see how much of an overrun there is, or if there is a surplus.

I have been around the health services for a long time. I remember the health boards and the overruns during that period. There were overruns as far back as 2000. There must be a time when we identify what practice is repeatedly causing this problem, and deal with it. If we do not deal with it, it goes on forever and in 20 years' time, someone will be sitting here talking about the same thing.

I remember the American politician who spoke of known knowns and unknown unknowns. At a certain point, we need to know where the particular bodies are buried so that we can navigate our budget accordingly. Take the issue of finding accommodation for certain people who require it after their parents have passed on. The HSE deals with that. Crooksling has the capacity to cater for up to 100 people, yet the HSE wants to close it and is undermining it and slowly strangling it to do so. That accommodation is already there and there would be no capital costs involved at all. However, the HSE says it wants a different system in a different place but to what benefit? I do not know. I was on the visiting committee of that nursing home many years ago. It is still structurally sound. An engineers report might say that is not the case but it is. We must sometimes dispute the opinions of engineers as well as economists and financial controllers. However, there is no use in saying on the one hand that we have a budgetary overrun and that we are providing alternative accommodation when we already have accommodation that is built and paid for. I would like clarification on that.

The greater incidence of treatment for an ageing population was raised and I accept that but it must be possible to budget for it accurately. The information is already there. Unless there is a particular issue that we are not being told about something must be done.

There is a simple way to deal with matters relating to the State Claims Agency. How are the overruns of its expenditure monitored? Is this in line with neighbouring jurisdictions? If not, if they are above or below, then we must ask the reason.

Private insurance and providers' reluctance to deal with emergency cases was raised. I would like to know more on this. It looks as though the public health sector could be subsidising the private health sector, if we are to assume what I think that means.

It must be possible within the public health sector to take a hospital, for instance, and compare it with the private sector. It must be possible to make a comparison on a like for like basis. I do not accept that it cannot be done and it is like comparing chalk and cheese or apples and strawberries. It is possible and needs to be done as a matter of urgency because otherwise we will continue to embarrass ourselves by suggesting that something is wrong that we cannot identify it.

My last point relates to my own hobby horse of how the chain of command operates within the health services. If a consultant wants access to facilities in a theatre or to radiography, for instance, and cannot avail of those services, that represents a loss of money and potential lost revenue. If one holds up the facilities that are there, and does not use them for any period over a working day, that is a financial loss and a liability on the system. I would like to see someone identify those blockages once and for all. They may be explainable and it may be possible to explain them away, but I have not heard anyone do so yet. I am concerned that we continue on with the same issue year after year, and we are no closer to getting to the bottom of it.

Would Mr. Mulvany or Mr. Desmond care to respond?

Mr. Colm Desmond

There are several questions which span both agencies. I will respond to the Deputy in no particular order. On the State Claims Agency, adjoining jurisdictions may operate under different legal systems. We would have to provide some information on comparative awards or how they operate if that is what he is asking for, but we are talking about quite a specific legal context within each jurisdiction. We have that here. It is the unpredictability of a certain component of the likely State Agency costs which can create issues for us, as I explained earlier.

I do not have particular data available that I could share with the Deputy here.

Mr. Colm Desmond

We can certainly inquire for the Deputy.

I did not ask Mr. Desmond to inquire about it. I want to know if we could get it.

Mr. Colm Desmond

I will follow up.

I thank Mr. Desmond.

Mr. Colm Desmond

In relation to private insurance in public hospitals, the Sláintecare report requested the establishment of an independent group to examine private practice in public hospitals. That work is ongoing and is well advanced at this stage.

How long is that work ongoing? I am sorry to interrupt.

Mr. Colm Desmond

It has not taken that long to-----

Mr. Colm Desmond

Not quite. The Sláintecare report is quite recent in that context.

I am aware of that but the issue of the evaluation of public versus private practice, the correlation there and the possibility of subsidising one by the other, has been in the public arena for ten years.

Mr. Colm Desmond

It is an issue of concern and interest-----

For approximately ten years.

Mr. Colm Desmond

-----for a considerable period of time. As for the specific recommendation of the Sláintecare report, that work has commenced, the independent group has been working at a significant pace since its establishment following the quite recent Sláintecare report and the work of that group continues on apace.

In relation to pharmaceuticals, there is in-built into the system pharmacoeconomic assessment of significant drug proposals and that takes place at the beginning of a stage where a drug is potentially likely to come onto the market. It is a complex area and is the subject of a separate medicines management programme. It is certainly well established at this stage, including the corresponding process of achieving savings through the engagement with the pharmaceutical sector, for example, at the same time, from the existing drugs budget. As I mentioned in my opening statement, there are continuous pressures in certain areas, such as high-tech and other drug requirements.

Is it true that some drug companies are offering similar drugs at a fairly substantially reduced cost to the public health sector?

Mr. Stephen Mulvany

The Deputy may be referring to the fact that the Humira drug is coming off patent. There was some ill-informed media comment on that in recent times. To back up what Mr. Desmond is saying, the HSE conducts a detailed horizon-scanning process in order that we are aware what drugs are in what different stages in the process. There is legislation which covers this, namely, the 2013 Act. We are ready, subject to getting applications - which we have started to get - from bio-similar suppliers, and subject to them having stock, to have those approved from 1 November. We are satisfied nobody would have had stock in the country before 1 November. The HSE processes, which are complex as this is a complex area governed by legislation, have been accelerated to ensure that as soon as stock is available and the appropriate applications in process are made we will give approval for bio-similar drugs, which will bring a substantial cost reduction as and from 1 November. It is unfortunate that the journalist did not seek input from the HSE in advance of writing about this but that is the fact of it.

I am sorry, I did not get that.

Mr. Stephen Mulvany

It is unfortunate that the journalist did not seek comment from the HSE in advance of publishing that article.

Mr. Stephen Mulvany

I cannot remember the name of the journalist. There has been media comment intimating that the HSE would lose substantial savings because it was not ready for a particular drug coming off patent and having a bio-similar available for it. That is not true. The HSE will be available from 1 November and those approvals will be in place subject to the bio-similar suppliers having stock and having made the necessary applications, some of which have already started.

I thank Mr. Mulvany. I will now ask Deputy Kate O'Connell.

Can I get an answer?

Sorry, has Deputy Durkan some questions unanswered?

I have a whole lot of them unanswered, for instance, the residential places.

Mr. Stephen Mulvany

I do not have specific information about Crooksling. I mentioned in my opening statement that €15 million of the deficit at the end of August relates to public long-term residential facilities, some of which have cost levels that are well above other public units and above those of the private units. While there may not be direct comparability between those two, that is something in which we obviously are interested. I will not comment specifically on Crooksling but that challenge of being able to get sufficient occupancy of the beds, to comply with HIQA registration requirements, which in some cases requires us to reduce the number of beds in existing facilities, and then to be able to staff those facilities appropriately with the right skill mix and not be obliged to incur substantial agency and overtime costs, as we are in a number of places, is another factor at which we must look carefully in this year's service planning process for next year because that overrun of €15 million could perhaps be better served in investment elsewhere. I am not commenting about Crooksling and do not know whether it features in this particular discussion but that is the bigger picture around direct provision of long-term elderly care versus private provision.

I thank Mr. Mulvany. Now, I call Deputy Kate O'Connell.

Mr. Stephen Mulvany

If I might correct something, I understood from previous briefings that whichever journalist published a story about Humira in recent days had not sought comment from us. I now understand that the individual had and we were not in a position to provide it in time. I withdraw that comment to correct the record.

When Deputy Durkan was asking about the price of the orphan or high-tech drugs, Mr. Mulvany spoke of the robust assessment that happens, I assume through the National Centre for Pharmacoeconomics. That is all good. Am I correct in saying that there is scope for a Minister to override the economic decision of that group? If the quality-adjusted life year, QALY, number comes back as not being value for money, the Minister can override the decision of the National Centre for Pharmacoeconomics, NCPE.

Mr. Stephen Mulvany

I will make a couple of points. The Minister has powers in this area, the specifics of which my colleagues can talk about.

The NCPE the Deputy mentioned is part of the overall process but the process is run inside the HSE. The HSE has a drugs committee and it will engage the NCPE to do those health technology assessments. That process is quite exhaustive. There are 13 grounds that the 2013 Act requires us to look at and the decision is not made solely on the quality-adjusted life year, QALY, number.

Mr. Stephen Mulvany

Or the sums. There are some drugs - I am speaking of an area about which Deputy O'Connell would know far more than I do - which might never meet those simple quality-adjusted life year, QALY, thresholds and the decisions about those get ever more difficult and challenging. We, the HSE leadership team, will at times approve based on recommendations from our drug committee. We can approve and have approved in the past drugs that go beyond the standard QALY thresholds for various reasons. No doubt the Minister has capacity in this area as well.

What I am getting at is that in the UK, where there is perhaps pressure or the QALY does not come in as being approved, they often allow 18 months or two years of treatment period with a new drug and for the patient to be assessed thereafter so that one is not merely giving it and letting it go continuously. If it is a high-price drug, it is reassessed to see what impact it is having on the patient's condition. I have reason to believe some data are coming out for a particular drug, which I am not prepared to name, that was approved last year in which the outcomes do not seem like providing value for money as well as was portrayed, perhaps in the audiovisual, AV, room or whatever. It is difficult to take something off somebody. How does the HSE stem the flow? If patient X gets an orphan drug that is supposed to help the patient but in two years we are still paying for it and the doctor decides there is no clinical indication to continue, has the HSE built in a system of saying "No"?

Mr. Stephen Mulvany

As the Deputy can imagine, for some who might be watching, it is difficult to talk about money and having to restrict life-saving drugs.

We are here discussing income of the HSE and it seems reasonable.

Mr. Stephen Mulvany

Absolutely, but I just wanted to say that. If an individual's child was told that this drug would sort his or her problem, no amount of money would be an issue. Against that background, the HSE's drugs approval process governed by legislation is extensive and seeks to be balanced and where it is necessary, we do not approve drugs. We approve certain drugs only when the price is lowered.

I know all this but my question was specific. Mr. Mulvany knows my question. When the HSE initiates somebody, a child or adult, on an expensive high-tech or orphan drug on which perhaps the sum does not add up but a decision is made to give it, has the HSE any way of pulling back from that decision if the therapy is not giving bang for buck?

Mr. Stephen Mulvany

I apologise; I was coming to Deputy O'Connell's question. In some of the approvals that are granted, access is restricted to a certain protocol-driven access. In some cases, we place a cap on the level of resources depending on the subsequent efficacy results. Whether we can ever cease reimbursing an individual patient is beyond my level of knowledge so I will not comment on it. I will get the Deputy an answer to the question.

I am aware that in the UK, one way they deal with it is by saying a patient can have it but there should be an outcome as per the trials. They will give it but if a patient is not getting the results, they will state they cannot spend £100,000 a month on injections or whatever.

Mr. Stephen Mulvany

I will get the Deputy an answer to that specific question.

I brought it up here some time ago.

Perhaps someone asked this question while I was absent but do we know where we stand with the €17 billion spend on health? What is our income from private? I remember from Sláintecare it was about €5 billion. Is it still €5 billion that private is funding into public? What is the total?

Mr. Stephen Mulvany

The acute hospital income, at its height, was about €630 million. Looking forward to the year end, we see a problem of €90 million to €100 million in that area due to insurers encouraging their members not to use their insurance going through emergency departments and so on.

It is half a billion euro.

Mr. Stephen Mulvany

Yes, it is about half a billion euro, not €5 billion.

How do we stand now in terms of the OECD? Are we the highest spend? I think we were the second or third last year. Are we top of the list now per capita?

Mr. Stephen Mulvany

The US will never be knocked off top of that list. We are about fifth or sixth per capita. The most important thing about those OECD figures is getting to the point where there is an understanding of whether they are indicating that the resource level in health for the outputs is too high or not. The Deputy will not want to listen to me talk about this but most of the commentators, including the Library and Research Service of the Houses of the Oireachtas, have urged caution as to how we use those figures. The per capita figures may be more reliable than the GDP figures. We know the GDP figures flatter Ireland. We talk about gross national income and so on and so forth. There are lots of statistics which place Ireland at different rankings. Some of them place us towards the top. We are fifth, sixth or seventh according to the OECD. There is also a statistic on the rate of growth in public healthcare spend in the OECD from something like 2008 to 2017 and Ireland is at 0.8%, which is 32nd in the OECD. Does that counteract all the other arguments? I do not know but I urge caution when looking at those figures.

It is not as clear because we are giving different things.

Mr. Stephen Mulvany

It is not as clear and there are specific reasons acknowledged by the likes of the OECD and our own CSO such as the fact we tend to report the €3.5 billion to €4 billion in social care spending in respect of disability and the elderly and there is a lack of certainty as to whether all other countries that are counted in those figures report that in the same way. There are other issues like that. I am not saying it means the figures are wrong. I am just saying, as I think Professor Wren in the ESRI has said, one should be careful about making policy decisions based on which particular ranking we have in the OECD GDP figures or purchasing price parity figures.

The spend of the State Claims Agency has rapidly increased. Is that due to us having a more litigious society or is it a result of recruitment issues in the health service? We have heard at length from various people, including doctors and people in the HSE, that back in the day, when a post was advertised, there would have been six or seven eminent people applying for it. However, in the past ten years we have often had positions for which one or two people applied and they were not the people to whom the job would have been given in the past. They are qualified but there is no competition there. Is the exodus of our professionally trained staff and the reliance on locums and agency staff contributing to the increase in claims?

Mr. Stephen Mulvany

I have asked the State Claims Agency on a number of occasions - I am sure its representatives will be here in due course - whether the significant growth in our reimbursement of it in recent years is driven by the incidence of claims, in other words what we are doing around practice, or whether it is driven more by the operation of the legal system and how that process works. The answer has always been the latter and that is a result of how the legal process is operating rather than the incidence level.

So the lawyers are getting more money rather than-----

Mr. Stephen Mulvany

That is one way to characterise it.

The money is going there.

Mr. Stephen Mulvany

The biggest single driver is catastrophic obstetric cases. When we ask if our number of such cases are outside international norms, we are told they are not. The answer I have always been given is it is more to do with how the overall claims and legal process operates, as opposed to the underlying healthcare issue.

When the HSE looks at the catastrophic claims, does it divide it down into speciality? Is it divided into psychiatric and maternity? I imagine our instances of catastrophic maternity cases are higher than in most countries.

Mr. Stephen Mulvany

Maternity-related catastrophic cases comprise the single biggest area by far. That does not mean there are not quality and risk issues within the health service that we have to attend to and work on constantly. It does not mean the Deputy is wrong that there have been increasing levels of challenge in recruiting consultants in certain specialties. I am just not drawing a link between that and the State Claims Agency figures.

Mr. Mulvany is not saying there is not a link. On the demographic pressures, which Deputy Durkan brought up, it always seems to be a surprise that people are living longer. The inference is they are costing us a load of money and it is all their fault when we are the ones who kept them alive. Has someone done a quantitative analysis on this? Take the example of a 65 year old who is given more tablets, which stop the person ending up in hospital as an inpatient or in acute care. It is better to have people alive at home on tablets than occupying an acute bed. Has an analysis been done on the price of keeping people alive over 70? Have we done those sums? What is the Exchequer value of them? It seems to be thrown out easily that they are costing a fortune.

Mr. Stephen Mulvany

We would not speak in a negative way about the fact that people are living longer.

I am not saying it either.

Mr. Stephen Mulvany

Is it in some way a bad thing?

I am saying demographic pressures are constantly thrown out as a reason.

Mr. Stephen Mulvany

If the Deputy's question is whether it is possible to forecast changing demographics, of course it is. Do we forecast changing demographics and the impact it will have on activity and costs? Yes. Do we know how many additional complexity weighted units can be caused simply, even with the same number of beds, by people who are a year older going into them? Yes. That information, at a relatively broad level, is available. What our commentary and analysis is acknowledging is the fact that the ongoing ageing of the population inevitably drives additional costs although it is a positive thing. It drives additional complexity. It means there are older, more vulnerable people in hospitals and healthcare facilities. They are therefore more open to infection and other issues. It can mean longer stays and so on. It is just a positive reality.

Surely it would be balanced from a budgetary point of view by people living healthier lifestyles and perhaps not turning up as young with type 2 diabetes. It will balance. Keeping people alive longer is important but so is people not entering the health service and requiring treatment. Over time it should balance.

Mr. Stephen Mulvany

Over time potentially it will. The model of care we have today is the model of care, broadly speaking and given some adjustments, we will have in 14 months' time. It is the cost of that model of care that is the issue in any year. We will also then do longer-term planning such as through the Sláintecare process to say we want a completely different model of care. We will not turn around the model of care in 14 months. While people living healthier lifestyles is absolutely the way to go, what we are faced with is treating the people who are in front of us now or who want to be in front of us now. In 14 months' time, broadly the same model of care, albeit with some adjustments, will be what is costing in that period.

I want to touch on accountability. There is a lot of talk of clinicians being held to account.

Take the example of a multi-billion euro organisation in the private sector in which the chief executive and his or her team reports to the board every year. If they were overspending by €600 million to €700 million per year and that did not stop, the chief executive and his or her financial team would be fired. That is what would happen. Given that the overspend has been in excess of half a billion euro per year for the last five years has anybody in the Department or the HSE lost his or her job due to these ongoing massive annual overspends?

Mr. Stephen Mulvany

The simple answer to that question is "No".

Is it the same for the Department?

Mr. Colm Desmond

No, to my knowledge.

Has anybody ever been formally sanctioned for any of these overruns?

Mr. Stephen Mulvany

The accountability process we have has the potential for sanction and the sanction can be up to and including disciplinary action. It does not start there, obviously. Accountability is about being responsible for and answering for-----

I understand the concept of accountability. I am asking a direct question. Have formal sanctions of any type ever been applied against any member of the HSE or the Department for these overruns?

Mr. Stephen Mulvany

We have issued performance notices and we have escalated services and their teams around their performance. Have we sanctioned an individual and imposed a disciplinary sanction on an individual? I need to avoid just giving a simple "Yes" or "No" because that is not a simple question. The factual answer is a short "No", but the implied question behind it as to whether somebody should have been is a much longer discussion which I am happy to have. However, there is no simple, "you are fired due to this"-----

Or, "you are sanctioned" - there has been no formal sanction applied.

Mr. Stephen Mulvany

If by "sanction" the Deputy means some period of suspension or something of that personal nature-----

It is anything formal, such as demotion, suspension, formal performance management that would lead potentially to losing one's job over time, fired or a cut in wages. Has any formal sanction been applied against any member of staff?

Mr. Stephen Mulvany

Not on an individual staff member basis, but we have put services through escalation processes, required improvement plans and followed up on those improvement plans.

That is all fine, but that is a system-----

Mr. Stephen Mulvany

That is the necessary part of any accountability and performance management process. Has it led to disciplinary action? No.

Okay. I ask the witness to reflect on that. If he has a system that overspends by vast amounts of money every year - it did not always do it but it does now - and nobody ever loses his or her job and nobody is ever sanctioned in any way for it, he is not sending out the right signal in terms of this having to end. This has changed. Professor Brendan Drumm wrote an open letter to The Irish Times pointing out that in his tenure between 2005 and 2010 the HSE operated within budget except when the Government of the day announced new initiatives to be launched in that year. The spending beyond the allocated budget was for new initiatives, but the budget as allocated met the services under the plan. Now we have moved to a situation where it has become normal that the HSE overspends by €600 million or €700 million. The witness said no provisioning is done, so he might reflect on that.

There have been overruns of between €500 million and €700 million over the last five years. At the start of each year did the witnesses believe that the budgets would be met and that the HSE would operate within budget?

Mr. Colm Desmond

For the Department?

The question is for both witnesses.

Mr. Colm Desmond

The budget for the year was set in accordance with what the Government allocated. It is a requirement of the HSE to deliver the service plan within that allocation. Obviously, significant choices are made as to how to cover the full range of services that need to be provided and funded, as Mr. Mulvany outlined earlier. Within that there is necessarily a management process throughout the year to ensure that, as much as possible, those services are provided within the overall allocation provided by the Government. In addition, as I mentioned earlier, the efficiencies which necessarily should be a part of any service moving forward are built into the system. While they were ambitious this year, they set a basis for how this might be approached in future years. It is very challenging to provide the required funding for the services required and also take account of the unforeseen issues I mentioned in my opening statement. I do not know if that answers the Deputy's question.

No, it does not. Over the last five years the overspend on health has been between €500 million and €700 million. Did the witness think at the start of each of those years or in any of those years that he would come in on budget?

Mr. Stephen Mulvany

I will answer that question. What we thought about the year ahead is what was set out in the service plan. As Mr. Desmond said, there are certain legal parameters around that. We have sought in each year to be as clear as practicable about what the risks are in the delivery of the service, and then we engage on and report on that. We are very clear that our job is to provide the maximum amount of safe services, to try to have a continual and sustainable improvement in those services and to do that within the resources available. We have not managed to do that for a number of years at a significant level. That is acknowledged as a fact. With regard to the analogy with the private sector, and I am not saying the Deputy is doing this, there is significant evidence which shows that the authorisation environment in the public sector is not the same as the private sector.

I am not asking about the public and private sectors. I am asking a simple question.

Mr. Stephen Mulvany

At the start the Deputy mentioned nobody being fired and that he would fire the CFO team. I serve at the pleasure of the director general and it is a matter for him if he wants me to do this or not. However, the analogy is not straightforward. I am not trying to drag other Departments into it but in percentage terms the HSE, while ours is always the biggest because we have practically the biggest Vote, has not been No. 1 or No. 2, and in some cases not No. 3 or No. 4, in recent years in terms of its requirement for Supplementary Estimates. Each of those will have individual reasons. One has to go through what was in control, what was not and what is a performance issue versus what is not. They all have to be examined specifically. In recent years-----

I understand that. However, it is not addressing my question. At the start of each year in the past five years did Mr. Mulvany think that he was going to come in on budget for that year?

Mr. Stephen Mulvany

What we thought was set out in the service plan. If the risks that were set out could all be managed, yes we could.

I am not looking for ifs. I am asking Mr. Mulvany, as the chief financial officer, and Mr. Desmond, as one of the senior officials in the Department, if it was their view at the start of the year, in the round and given the risks and complexity, that they would come in on budget in each of the past five years.

Mr. Stephen Mulvany

I have answered the question the only way I can.

Mr. Mulvany has not.

Mr. Stephen Mulvany

My view was what was set out in the service plan, and the accompanying letters that go with it. I do not have a different answer to give.

Mr. Mulvany could give me a "Yes" or "No" answer. It is binary. He either thought he would come in on budget or he did not.

Mr. Stephen Mulvany

To be frank, this issue is much more complex than that. I do not accept-----

With the greatest respect, it is not. Any CFO handing a board or a chief executive a budget at the start of the year has a view as to whether that budget will be met. It is quite binary. A chairperson of any board will ask the CFO: "Do you believe that this is a reasonable budget and that we are going to come in on budget?". Did Mr. Mulvany believe on 1 January last that it was likely to come in on budget?

Mr. Stephen Mulvany

I have answered the Deputy's question in the best way I can. I do not have a different answer to give.

With respect, I do not believe Mr. Mulvany is answering the question.

On savings, there was what appears to be a made up number, the €347 million. Some €60 million can be accounted for in terms of targeted savings.

There appear to be opportunities for savings across the system. For example, I spoke with a senior consultant recently who prescribes very expensive drugs and who produced a paper stating that he could change his way of working and save approximately €5 million on the prescribing that is being done but that he could not get anyone from the Department or the HSE to meet him and take it seriously. I see examples of savings across the system all the time. I also see examples of process improvements that would ultimately lead to savings. For example, clinicians at Tallaght Hospital wanted to introduce a triage room. Such rooms are part of standard practice in emergency medicine. It took five years to get the room commissioned, which gives rise to issues regarding patient safety and also funding. The issues relating to funding arise because there are missed savings in such circumstances. What is being done to try to tap into the efforts of administrators, doctors, nurses, porters and managers? The staff at most hospitals - on wards and in emergency departments - I visit can literally point to where cost savings can be made but they state that nobody is listening and they cannot get anything through. What is being done to try to change that?

Mr. Stephen Mulvany

On the example of the consultant who feels he or she can make a saving, if there is some detail we can share on that, we will certainly seek to track it down. The HSE is trying to promote a culture that allows people to interact in respect of some of these issues. However, an aspect of this is a cultural matter relating to values rather than value for money. Are the different parts of the team - cleaner, porter or consultant - in a hospital all able to speak frankly to each other? There is a piece around that and how that is changed over time. Work is under way on that. A values and action programme is under way. It is not about money, it is the overall culture.

People have different views about what constitutes a saving. There are savings that simply take cash out while others are valuable but what they mean is that we can get extra for less than would be the case. Some of those savings will actually increase the cost. I take the point that we must pursue the stuff that is safety or quality driven in any event . That must happen.

We are going to continue the value improvement programme. It is accepted that we need to energise it more. It is clearly set out in the service plan that this ought to identify additional levels of savings beyond those that our system generates on an ongoing basis throughout country at hospital and ward level and in the community and psychiatry, not all of which we can capture, cost, measure or report. Part of our system is about continuously making improvements at individual team level. That is something to be encouraged. We cannot report on all of that and some of it gets swallowed up because something else happens or costs grow and they are not funded for one or the other. We have a substantial amount of work to do in the context of trying to develop and promote savings initiatives, but significant savings are already being driven in parts of the health service. The €60 million we will get this year in value improvement is not insignificant. It is a problem when we compare it with the overall target. Hundreds of millions of euro in savings are being delivered by our primary care reimbursement service every year to try to contain drug costs so that we can allow more new drugs in that are needed. Those savings are built into the base. Their targets are driven by the base so they do not close any of the gaps. We would be wrong to say that there is only €60 million worth of savings in clinical service. The issue is capturing and reporting on some of them.

I want to return to the overspend. As far as I can see, there is a serious governance issue with this. Do the witnesses think the disbanding of the HSE board will have contributed to these overspends?

Mr. Colm Desmond

If I can answer without going back in history about the disbandment of the HSE board, I was not in this post at that time. Sláintecare recommended that a board be put in place. The governance legislation for that purpose is before the Oireachtas so there is a recognition that governance within the HSE and accountability constitute an ongoing process. In any complex area, which, with respect, is not as straightforward as, perhaps, the private sector and which involves a slightly more limited set of parameters in some cases, there is an acceptance that it is an ongoing process that we need to remain on top of. For that purpose, a board is being re-established. A chairperson has been appointed and the process is continuing at a very fast pace.

Various approaches have been taken over the years in terms of the delivery of health services and what the appropriate structure is at the top of the health sector. We would simply say that regardless of the history, about which I cannot comment, this is where we stand at this point in time and the recommendation of the need to continue to reform, improve and deepen the accountability and governance structures within the HSE and the health sector generally is there.

Does Mr. Mulvany have a view as to whether the disbandment of the board may have contributed to the escalation in overspends?

Mr. Stephen Mulvany

I do not because I do not want to comment on policy. The senior leadership team of the HSE did not propose the abolition of the board.

Was Mr. Mulvany there?

Mr. Stephen Mulvany

I was.

I am not asking Mr. Mulvany to comment on policy. I am putting the question to him in the context of his role as chief financial officer. Perhaps he was or was not there at the time; I do not know. I am not asking Mr. Mulvany to comment on whether it was the right call. What we are trying to understand is the escalation in overspends.

Mr. Stephen Mulvany

I cannot make any direct correlation between them. We should not forget that the purpose of a board is to operate both internally, in other words, to face down into the organisation, and externally. Would things have been different across a number of fronts if there had been a board? I am sure they would? Would that have been better? Government policy is to the effect that we should have a board. That this seems to be appropriate. If I go very much further, I will end up commenting on policy.

To return to savings, I have been approached by a number of people who have savings plans they have costed. One concerns haematological transplant procedures at Our Lady's Children's Hospital, Crumlin. Approximately 30 children require transplants every year. Our Lady's Hospital can provide 15 of these. The remaining 15 patients must go abroad but the cost is double that of providing the service at Our Lady's Hospital. The funding comes out of the treatment abroad scheme, which has a separate budget. The saving can be made but it is in a separate budgetary category. If somebody has an idea like that, is there a single point of contact in the HSE they can approach to discuss their idea in the same way as Senator Colm Burke's reference to GPs providing haemochromatosis services at a fraction of the cost of providing these services in hospital? How do people with ideas about savings make contact with the HSE?

Mr. Stephen Mulvany

Our Lady's Hospital, Crumlin, is part of the Children's hospital group. The latter has a clinical director and a CEO who reports directly to our head of acute operations so there is not a long leap there. If anyone has specific proposals they want to share with me, I can assist in pointing them in the right direction but, generally speaking, the route is well known. Our Lady's Hospital, Crumlin, has a CEO, there is a group CEO and there is a national director for acute operations. That tends to be the route along which these things go. The challenge about it being in a different budgetary line is one we must face. If there are real savings there, we must look at them. Again, people's idea of what constitutes a saving tends to vary. I suggest that the individuals in question could use any one of those lines - their own CEO, the hospital group or indeed the national director, with whom people would often communicate directly. We can take it through that process. I am quite happy to assist if people want to communicate with me directly and I can point them to the right part of the organisation.

Mr. Colm Desmond

On a slightly higher level, the HSE and the Department agree in respect of the capacity for savings in pharma and technology.

There is a potential for savings in that area next year but certain costs may be needed to trigger certain savings. That area is being pursued actively in the framing of the service plan for next year.

The Chairman's question related to specific ideas that have come to the notice of the committee. It is a fair point and there should be a means by which they can come up through the system. It would not be for the want of the expertise within the system not realising the benefit of and making the best of such proposals, perhaps having considered them previously, or they may see other aspects to them that may or may not be as clear-cut as might be presented. Certainly the capacity for savings in this area is well recognised.

I will try to be brief. Reference was made to the period Professor Brendan Drumm was in charge of the health service and whether there may have been overruns at that time. If my memory serves me correctly, that period coincided with the imposition of the moratorium on recruitment, and by the way I am not defending Professor Drumm's record. Would that have been around the same time?

Mr. Stephen Mulvany

I believe that was 2007.

It was trying to get that clear in my head. I referenced earlier the general funded workforce plan. When I briefly stepped out of the meeting, I checked the specific one for nurses and midwives. It has been brought twice to the Workplace Relations Commission and now it is going to the Labour Court. I emphasise it is the funded workforce plan for 2018 and it is now almost November. We all know it is not easy to get a date for a Labour Court hearing unless one is about to ground a large number of planes. Therefore, it is unlikely in this instance. If we are talking about controlling costs and getting value for money, if we do not have a funded workforce plan for the single biggest grade within the health service at this point in the proceedings, that figure of €346 million was never likely to be achieved, as there is no plan in place for the number of staff and, therefore, there is no capacity to control agency staff numbers, overtime or any of the other steps that have to be taken to make up the shortfall. Does Mr. Mulvany agree that the funded workforce plan and the workforce plan for all grades, groups and categories should be agreed at some point? We should be talking about the plan for 2019 now and not about the plan for 2018 when it is almost November. It strikes me there is not a great deal of forward planning going into this process.

Regarding the savings figure, was some of it earmarked to be offset by a contribution from the stretch income targets? We considered those previously and, as I recall, it was brought to our attention by the chief executive of one of the hospital groups - do not quote me on that as I cannot remember exactly who it was but it was stated in a submission that was made to us - that individual hospitals and hospital groups were given targets to collect money from private sources - I assume from health insurers and whatever else - and that stretch targets had been added to those targets, whereby if the target was €5 million it was stretched out by a certain percentage. Is the HSE still doing that? Does it still impose that requirement on chief executives?

Mr. Stephen Mulvany

The Deputy has raised a few points. We have not increased the income target for private maintenance income, which is the target that is set for all the hospitals, in the past two years, partly because it would not be prudent to do so given the difficulties we are having with private insurers and their campaigns, and other actions. It is important to note that the private income charge is a legislation-based charge. Once somebody is covered by the charge, the hospital has to levy it and pursue it.

I am aware of that. I am not talking about the actual charge. I am talking about stretch income targets, the target versus the figure. There is a difference. Mr. Mulvany knows that. There is a difference between collecting all the money which HSE is obliged to do, and that is separate, but setting a target for the amount of money causes a problem with regard to how the HSE is going to plan, as a bizarre incentive is imposed on public servants to impose a target on other public servants to collect money out of the private sector. If those stretch income targets are still in place, I would be worried because it is not a prudent way to plan and because of various other reasons that I will not go into here. If Mr. Mulvany is saying the targets have not changed in the past two years, I can only assume they include the stretch income targets. We reviewed this less than a year ago and the stretch income targets were included. If the HSE is aiming to hit a figure of savings and it is massively wide of the mark, which it is, and it is counting in the stretch income targets in that figure, that brings me back to the point that the witnesses have not been able to provide an explanation as to where that figure came from, which is worrying. If stretch income targets are part of it, is it not time that the HSE acknowledged that it is not working and that it should try to figure out another way to proceed?

Various initiatives took place a number of years ago and Professor Drumm was one person who initiated them. They included having a conversation with staff. We spent a long number of days in Government Buildings where we were given the use of a room and health service workers came in and talked about the way on-the-ground savings could be achieved. It was around the time the moratorium on recruitment was imposed. Much of what we heard were simple changes and how the staff envisaged such simple changes could be made. I am not talking about the big issues, such as the out-of-control agency staff bill, but some changes that could be achieved at the level of the ward or the primary care centre. Suggestions were made by staff but they were not followed up on.

That might be something the HSE would consider ensuring is followed up in the context of a plan. If, say, a staff nurse in Letterkenny General Hospital has an idea for the way she would improve the running of a ward, that might not be a feasible consideration as we would all have the idea that if more staff were brought in, we would not have to deal with constant crises, but if she or, say, a porter in Tallaght Hospital has a worthwhile idea, how could they realistically feed that into the organisation and how would it be taken on board? The top-down approach was tried and, with respect, failed. Perhaps Mr. Mulvany would reflect on that and consult the representative organisations as many people have good ideas. The target is quite ambitious. Mr. Mulvany has just admitted that and he might need all hands to the pump. The organisation has missed it for this year but there is always next year.

Mr. Stephen Mulvany

On the Deputy's question on whether we would reflect and consider better ways to engage with staff at the coalface around what savings are practical, that sounds very sensible. To the extent that hospitals and community services are not already doing that, that is something we will take away from this meeting.

Regarding the stretch income targets, and perhaps it is a language issue, but the point I am trying to get across is that there is an obligation to levy the charge once the individual meets certain criteria. It is not as if people should be levying a charge in some way that is a stretch. Their task is to levy the charge when it is appropriate to do so. When I said we have not changed the target, I mean the €345 million is not dependent on somebody achieving a stretch target. If we were to lower the income targets, we would have to find more savings because the income targets and the income that has been raised support the costs of providing the service.

It is not the income targets, it is the stretch target. There are the targets and then there is the imposition of stretch income targets. That goes beyond the simple practice that if a hospital has a private patient, it levies that private patient, which of course it does. That gives rise to what happens if there are two patients in an accident and emergency department and only one bed is available where both patients have similar levels of acuity and one patient has private health insurance but the other patient does not.

When there are two identical patients, there is a perverse incentive for the patient with private health insurance or the means to pay privately to go into that bed because the stretch income target will then be met. This is not about whether people are collecting money at local level. That money is being collected. This is about the setting of targets and the stretching of those income targets, which creates a perverse incentive for people to prioritise. I am not suggesting that clinicians do it on any basis other than clinically, but in a situation where there are two people, both at the same level of acuity, and one bed, a perverse incentive has been created by the finance side of the house for people on the other side of the house to give that bed, in that scenario, to the patient who has private health insurance. That is fundamentally wrong. If that figure forms part of the €346 million, then it is no surprise to me that the HSE was massively wide of the mark.

Mr. Stephen Mulvany

The charge is set in legislation. Whether we should have such charges is a matter for policy. The Sláintecare report indicates a potential change in that policy, and that is being worked through. I am not giving my personal view on the charge. We may agree to differ on the notion of the stretch charge. Once there is any charge, there is a potential, all other things being equal, for the private patient to get into the public room. The important thing to stress is that single rooms are always clinically prioritised for things such as infection control. If all other things are genuinely the same, particularly clinically, the private patient will get the option to go into the single room ahead of somebody else. That is the impact of the legislation and policy because we are operating a system where we charge.

That is compounded by setting targets.

Mr. Stephen Mulvany

No, it-----

Mr. Stephen Mulvany

There is a target for everything. A target is just a forecast. There has to be some-----

This is a stretch target. This is what the HSE has been told it has to collect and, on top of that, an additional target.

Mr. Stephen Mulvany

I struggle with what the stretch piece actually means.

It came in a submission from the HSE. Mr. Mulvany should not struggle with it.

Mr. Stephen Mulvany

Maybe I will go and check what that submission was.

Mr. Mulvany can talk to Mr. Liam Woods. He was here. We spoke about it.

Mr. Stephen Mulvany

I will remind myself about it. There will always be a target, stretch or otherwise, for income. Once there is a charge for income on the basis we have, while I am not commenting on legislation, all other things being equal and after the clinical issues are dealt with, one will end up prioritising single rooms for private patients if there are any available, which there will not be in many hospitals. That is whether the target is ordinary, stretch or any other. That is the impact of having a charge and there is no point in denying it. That is part of it. Policy may change following the Sláintecare report and if the committee that is sitting decides that is practical. I am not commenting on the policy.

I thank Mr. Mulvany.

Mr. Stephen Mulvany

The Deputy mentioned the funded workforce plan. I will engage with my national human resources, HR, colleagues. We have set limits. Even if the Department had not, for reasons of assessment and understanding, approved the pay numbers strategy that we submitted, we have been managing against that level. We have set revised limits to the year end for whole-time equivalents. We have allowed for a certain growth factor. We would always say that, even beyond the growth factor allowed for, if somebody can actually demonstrate in net terms that they have dropped their agency and overtime work below the level which it was at when we set the targets in June, we will not beat them over the head. People may say that they feel they have dropped agency and overtime costs, but if the data do not show it, it is not supported. That would be part of the limit where we would say that some reasonable flexibility has to be allowed but only if they are sustainably dropping the agency and overtime work. It is not a case of telling us there will be a time lag or that it will happen in two or three months, but for it to actually happen and be sustained. I have no doubt that the Irish Nurses and Midwives Organisation is interested for valid reasons. The funded workforce plan is as much about growing the number of nurses, not about-----

And reducing the agency and overtime bill.

Mr. Stephen Mulvany

Absolutely. We share that concern. Nobody is against growing the number of nurses. The issue is having the resources to be able to pay for the nurses, which is part of the problem I am here today to address. I will talk to HR about where they are with regard to averting having to stop those planes land and the industrial relations process that the Deputy mentioned.

There was a report in a newspaper within the last fortnight regarding discussions that may or may not have been held about the overspend. The newspaper uses language such as "out of control" and other hysteria, but it has to be paid for. There was talk of some sort of curtailment plan for staffing within the health service. We have been there before with the recruitment moratorium. It had a huge impact on services. I understand it was not imposed by anyone on the other side of the table. Will Mr. Mulvany advise if there have been discussions on that? Is that being planned as a means to control? Mr. Mulvany knows as well as I do that it controls the services available as well as the staff cost. Is that being considered?

Mr. Stephen Mulvany

We have set whole-time equivalent limits. We looked at where we were at the end of June and asked where we can afford to have that grow or not. We have set limits on community healthcare organisations and hospital groups, which will set them for hospitals.

Are they published?

Mr. Stephen Mulvany

Not yet. Some are still being set at that very detailed level.

Is that for next year?

Mr. Stephen Mulvany

This is to the end of this year. In the service plan, we will use the same process to try to set limits for next year. We are not having a moratorium. We are setting affordable limits, which is the intention of the pay numbers strategy, where we say we can afford to go to a certain limit and no more. It is perhaps easier said than done in some areas of the health service but that is the intention. We have done that to the end of 2018.

Mr. Mulvany has that to the end of 2018. Can we see that? Is it published?

Mr. Stephen Mulvany

It is not published but I am sure we can make it available. I will talk to the clerk.

Mr. Mulvany might circulate as much as can be made available to the committee.

On behalf of the committee, I thank-----

Sorry, the Deputy had not indicated.

I had indicated but the Chair overlooked it.

Excuse me.

There are pressures of time and such. I have a couple of questions along the lines pursued by my colleague. One relates to the comparison of costs with other OECD countries. There was a point that it is like comparing apples and oranges. The parliamentary financial advisory body has said something similar. We need a basis for this argument. It is not rocket science. It is very simple to figure out what level of our GDP, GNP, GNI, or whatever, is spent. It is easier to convert and compare accurately. They say that we are in the top four or five internationally for expenditure per capita. If the information is not available now, could we please have it? I am trying to adjust the barometer in such a way as to be able to compare like with like so that we know exactly what we are talking about.

Mr. Stephen Mulvany

It is not accurate to say that this is easily done. I can line up many health economists who will say that much more eloquently. I am only an accountant. That is not factually accurate. The OECD data generally put Ireland in the top seven or eight in per capita of GDP-----

Mr. Stephen Mulvany

It has not always done that. There have been many decades when we would have been behind that. I mentioned the €3 billion or €4 billion that we spend on social care and to what extent that is equally reported with other countries. With some of these measures, one is often measuring total spend on health. We are well down the league with regard to publicly funded healthcare expenditure versus total healthcare expenditure. Part of the question is whether we spend too much on health for what we get back.

I refer to two of the most expensive things in a healthcare sector. The same OECD data - data have to be used carefully - says that we have significantly fewer doctors per 1,000 population than the OECD average. We rank somewhere around 26 out of 34 on that. We have significantly fewer hospital beds, which is the single most expensive resource in any healthcare system. We rank 24 out of 34 on that. We also have the lowest increase over an eight year period which puts us at 31. That is using the same OECD data. I am not saying that means we do not get sufficient resources. We get more than €15 billion but I am saying that one cannot simply rely on OECD figures to provide the answer. Again when one looks at the hospitals, the OECD figures say that Ireland had a consistent bed occupancy of 94%. We are well ahead of the 77% OECD average. The doctors will tell one that at more than 85% bed occupancy on a consistent basis, one is demonstrating a system that is under stress. That is in the Department's capacity review document and that is a recipe for both efficiency, cost, and potential quality issues. That is all OECD data. Is it consistent? I do not know. It is not simple to settle that question. I agree with Deputy Durkan that it is something that a proper body, such as the ESRI, if it is not doing it already, should seek to answer. Having tried for a number of years, I can tell members it is not a straight forward thing to do.

If it is not a straightforward thing to do, that flags it is impossible to do and that we can never do it and yet everybody else does it. How have we come to a situation where we have fewer hospital beds per 1,000 population than most European countries? Experts, including medical experts, have told us that we have too many hospital beds and we have been told that for a number of years. The Chairman knows that as well as I do. I remember being involved in the initial stages of planning for a hospital some years ago. I thought at the time that we did not need beds given the expert opinion that was made available. I had to make a decision that that was not going to work and I was right.

It is all very well telling mere Dáil Deputies that this is not comparing like with like, that it is apples and oranges and that it is very difficult to solve it. As long as we keep on that route, we will never provide a health service that is efficient, effective and accessible. We need to drill down into the issues, find out where the problem exists, make the comparisons and solve the issues.

What is regularly trotted out is the demographics and the significant increase in the number of older people. I am not sensitive about this topic, although the Chairman may think I am. Nobody ever mentions the significant increase in the younger population, which is at least comparable and counter-balances the increase in the older population. If somebody tells me there is no increase in the young population, that person is wrong. One does not have to go into the statistics to find out that information because it is readily available. We have a growing young population because of the cohort of people who returned to this country or came into the country. They are counter-balancing in a positive way the expenditure on health.

Somebody needs to tell us what the situation is, instead of making excuses and saying this is the cause of all our problems. It is not. Drugs are an issue that needs to be dealt with effectively now. On the question on the State Claims Agency claims, I do not accept the notion that we cannot compare like with like in that regard. It is quite simple to check with the neighbouring jurisdictions. There are norms and averages. We can get those averages, even if we have to do it ourselves, and find out exactly how they have lower costs than we have. What is the cause of the problem? Deputy O'Connell referred to that matter as well.

I note the growth in staff numbers following the lifting of the moratorium. If we are to get to where we can provide a reasonable health service, we have to pay staff and so on. We accept all that but there are other issues that are virtually a diversionary tactic in that they just come up. I remember them from when I was on a health board years ago. The same old story would come up time and again. I do not accept that.

My final point is on emergency residential places. I will never understand why it is more efficient and effective to demolish a building. Over the past number of years several older buildings were demolished in this city and replaced with newer buildings. These new buildings are no more efficient and, in some case, the structures are worse.

Let us not forget that a building was leased for the Department of Health for a period of time during which it was not occupied. I know how that can happen but we are back to the old story of projections. It should not happen. If anybody in business rented a building in anticipation of being in it by a particular time, that is the only time for which the person will pay. That person will not rent a building and keep it until such time as her or she has enough money to pay for it. It does not work that way. We need to break down the barriers that are there.

I believe we are told what happens to be available at the time and we walk away. At a certain time, one gets tired of walking away. If one has been around for a long time, one remembers all these things and hearing the same points made. One asks oneself where did I hear that before? Why do I not want to hear it again? It is because it does not work and it does not tally. The health service is an organisation which has a significant budget and we need to deal with such situations as a matter of urgency.

I thank Deputy Durkan.

Mr. Colm Desmond

I will respond to a number of factual points raised by Deputy Durkan. The Minister for Finance announced on the budget day that the OECD had placed us fifth in terms of the EU 28 member states in per capita terms. I would point out that all the qualifiers Mr. Mulvany raised are very valid points to make in that context.

Mr. Colm Desmond

No, he is not. He is absolutely factually correct but I am simply saying that Mr. Mulvany has explained, and we would agree, that there are quite a lot of underlying qualifiers when one is reading international data.

The capacity review provides for considerable approach to enhancing the bed capacity in the health sector and the Minister has funded that. That is clearly a priority, as is Sláintecare, among the reform processes we have under way.

In regard to the Department's headquarters, the OPW appeared before a committee recently and gave the explanation on that process. It is the appropriate agency to do that because it was responsible for delivering that building for the Department.

Deputy Durkan made a very fair point on the increasing number of younger people versus the increasing number of older people. Absolutely, the ageing population brings with it the great benefits of what the health sector has achieved in recent years with longevity but that longevity brings certain costs, as we have explained. With younger people, the shift towards a primary care delivery and care in the community, which is underpinned and reaffirmed by Sláintecare, has to be the basis on which we try to develop a service that is closer to people in the community and prevents another generation of people moving into services which are more costly and not appropriate. I hope those points may assist Deputy Durkan.

Mr. Stephen Mulvany

I meant no disrespect to Deputy Durkan or any of the other member when I referred to the complex nature of using OECD statistics. I simply wished to point out that these statistics are complex. I did not intend to be defeatist.

It is something we need to get to the bottom of and we need to be able to say how we compare. My point is that it should be done by an expert body to be credible, perhaps by the Economic and Social Research Institute, ESRI, and it may already be in some work it is doing. The Deputy is correct in that Ireland has a comparatively younger population but it is ageing faster than other European Union countries. Unfortunately, in terms of healthcare costs, the younger population does not counterbalance the elderly population. Younger people typically have a lower draw on healthcare costs than the elderly, particularly outside the first year of life.

On behalf of the committee I thank Mr. Mulvany, chief financial officer and deputy director general of the HSE. I also thank Mr. Colm Desmond of the financial unit in the Department of Health and Ms Fiona Prendergast for coming in.

The joint committee adjourned at 1.10 p.m. until 9 a.m. on Wednesday, 14 November 2018.